Consider the case of Bogdan Enterprises:
1 answer:
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Answer:
annual saving = $444.42
Explanation:
given data
monthly demand = 774
purchases cost = $12
annual carrying cost = 34 % of the purchase price
Ordering costs = $29
solution
we know here annual demand will be = 774 × 12 = 9288 crates
and
carrying cost = 34 % of $12 = $4.08
so
economic order quantity Q will be
Q = .................1
here D is annual demand and S is ordering cost and H is carrying cost
so put the value we get
Q =
Q = 363.37 = 363 creates
and
total annual cost with EOQ will be
total annual cost = annual carrying cost + annual ordering cost ...............2
total annual cost =
put here value we get
total annual cost =
total annual cost = 740.52 + 742.02
total annual cost = $1482.54
so
order quantity = monthly demand = 774 crates
so total annual cost with current policy is
total annual cost is = annual carrying cost + annual ordering cost
total annual cost is =
put here value we get
total annual cost =
total annual cost = 1578.96 + 348
total annual cost = $1926.96
so
annual saving = total annual cost with current policy - total annual cost with EOQ
annual saving = $1926.96 - $1482.54
annual saving = $444.42